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August 1998 Vol. 13, No. 8   RSS Feed for Undercurrent Issues
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Hidden Costs of Travel

whopping unexpected taxes

from the August, 1998 issue of Undercurrent   Subscribe Now

The diving was good, the food was fine, and the price had seemed right. In fact, I'd been a happy diver until check-out time. That was when the price of my dive trip got bumped up a notch -- a big notch. There was the government tax of $220 that had been stuck onto my bill, plus a $98 service charge (even though I'd already left more than $150 in tips). I'd known about the $18 departure tax ahead of time, but the $486 cash outlay at the end of the trip used up my cash reserve.

Hard to believe, isn't it? Truth is, our readers can vouch for scenarios like this one -- and they have. Reader Linda Rutherford (Montara CA) wrote us after her visit to Lighthouse Reef Resort in May, 1997, complaining that "a significant tax of hundreds of dollars (VAT) is added to your bill when you check out." In December, 1997, Kevin & Susan Frazer (Eldridge IA) backed her up: "All the guests received a surprise on the last day in the form of $250/week/couple in V.A.T., hotel and departure taxes." Even though Rutherford described her stay as "very pleasant" overall, the tax surprise obviously left a bad taste in her mouth. In fact, enough guests complained that Lighthouse Reef decided to change its policy; all taxes are now included in the package price.

As a foreigner traveling in an undeveloped country, I don't have a problem paying a reasonable government tax, but it shouldn't come as a surprise, either at checkout or after booking -- which is when travelers sometimes discover that the amount charged to their credit card was not the advertised price. And scenarios like this happen all too often, because "taxes not included" can be buried in the fine print at the bottom of the colorful brochure. For savvy travelers it's important to know before you go, even if you're one of the lucky few who doesn't have to worry about the bottom line. The fact is that a package price that sounds attractive but tacks on tax charges at checkout may end up being a much more expensive option than the truly all-inclusive package that looks pricier.

When you call for room rates in Curaçao, for example, it's only natural to conclude that the Holiday Beach's rate of $840 per week, double occupancy, is a better deal than the Lions Dive's $970. But the Lions Dive already includes all taxes and gratuities, while, when you check out of the Holiday Beach, there'll be a bill for $163 in taxes and service charges waiting at the front desk. If you ask what the tax will run, the hotel that sounds $130 cheaper ends up costing $33 more.

Asking what the tax is certainly sounds easy enough. That was my first thought, anyway, before I started calling tourist boards from Belize to the Bahamas. Sometimes what they said sounded simple and straightforward, until I called some sample hotels and found that the rates they were charging weren't the same as the official rates I'd been given by the tourist board. Occasionally the tax rate at one hotel was very different from the rate charged by another hotel in the same country. Sometimes this was due to one tax being included while another was not, while other times it was just not clear to me -- or the resort reservationist -- how much tax was being collected and why.

The rule of the day seems to be to keep everything as confusing as possible. Belize, for example, has a 7 percent "hotel and tourist accommodation tax" on hotel rooms and a 15 percent value-added tax that covers all goods and services the hotel tax doesn't, including all food items, except for beans and rice. Try to calculate that one without counting beans, especially if you bought a dive package that includes food, diving, and transfers. In addition, Belize just added a new 1.5 percent "business" tax which reportedly will be calculated on the gross, which means that taxes will be charged on taxes -- as if things weren't confusing enough.

The trend is definitely upward. As recently as early May, hotel taxes in Honduras were a mere 7 percent; now, after an increase in the sales tax from 7 percent to 12 percent, plus a new 4 percent hotel tax, the rate is a whopping 16percent. Similarly, Bonaire's hotel tax recently increased from $5.65 to $6.50 per person per day and may be changed again soon.

Caribbean Tax Table
Hotel Tax
Other Charges
Belize 7% VAT of 15% on everything except hotel (and beans and rice)
Bahamas 8% surcharge taxes for electricity vary by hotel, quarterage and maid
gratuities common
Cayman 10% 10% gratuity standard, occasional surcharge taxes of 3-5% apply
Honduras 16%  
Grand Turk 8% 10% service charge common
Mexico 12%  
Bonaire $6.50/person/day 10-15% gratuities common, tax may be increased soon

Of course, there's more than one kind of tax on travel. Lodging taxes, alternately referred to as government taxes, hotel taxes, or bed taxes, are the most common, and many Caribbean countries have a hefty value-added tax, or VAT. Departure taxes ranging from $18 to $25 are routine, and some countries have flat-rate or proportional air travel taxes that are added to the price of the airfare. But there are also "surcharge taxes" on electricity in countries like Curaçao and the Bahamas that vary per hotel. And, although it's not a tax, service charges of 10-12 percent are extremely common, although many resorts say that they still consider tipping a voluntary reward guests may bestow when they receive good service.

Added up, it can be plenty -- at least in some places. That's the funny thing about the Caribbean: travel taxes vary widely. At Little Cayman Beach Resort, for example, taxes on the room portion alone comprise $192 of the $1872 two people will pay for a package that includes meals, dives, and room for the week, while Manta Resort in Belize says that tax charges only make up $21 of the $2100 they charge for a week-long two-person dive package. Similarly, the Arawak on Grand Turk charges $1822 for two people for a week, of which $278 is taxes and service charges, while Bonaire's Nassau Undersea Adventures' one-week dive package for two, which logs in at $1508, includes only $96 in taxes, with gratuities left to the guest's discretion.

Several tour operators told me that all taxes were included in their packages and that the only charges payable on checkout were for extras such as extra dives, dive equipment, and bar tabs (to which VAT taxes will be added). But some complained about what they saw as unfair competition from other operators whose prices were a whole lot lower -- but didn't include tax. One operator grumbled about a customer who'd just hung up after complaining that the package price -- with tax included -- was higher than the price charged by a competitor who didn't include taxes.

So, while the official tax rates are shown in the adjoining table, they're just the beginning of the story. The rate your hotel charges may not be the official one, and there's a long list of other possible charges to run past your tour operator when you book. That final question, "is that absolutely everything?" isn't a bad idea either.

-- J.Q. Trigger

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